Jump to ratings and reviews
Rate this book

Financial Statements: A Step-by-step Guide to Understanding and Creating Financial Reports

Rate this book
Explains how to read the three basic types of financial statements--the balance sheet, the income statement, and the cash flow--and uses this foundation to explain the flow of cash and product

223 pages, Paperback

First published January 31, 1998

Loading interface...
Loading interface...

About the author

Thomas R. Ittelson

8 books8 followers

Ratings & Reviews

What do you think?
Rate this book

Friends & Following

Create a free account to discover what your friends think of this book!

Community Reviews

5 stars
505 (41%)
4 stars
458 (37%)
3 stars
193 (16%)
2 stars
38 (3%)
1 star
12 (<1%)
Displaying 1 - 30 of 81 reviews
Profile Image for Amir.
Author 5 books24 followers
December 13, 2012

It is not easy to write an accounting book. A lot of accounting books are written for accountants which might makes a lot of sense however a large business audience may be left behind.

Mr. Ittelson does a decent job of balancing the explanation of accounting principles and the details behind these principles without getting into too many minute details as happen in other accounting books.

In the book first section, Mr. Ittelson starts with explaining the 3 accounting statements, each with its own line items and then “ties up” the 3 statements together, while explaining the different aspects of the movements between the statements. Mr. Ittelson also explains several important financial/accounting ratios at a later part of the book.

I think business owners and readers, who are not accountant by profession, will greatly benefit from the second section of the book. In this section Mr. Ittelson is doing a superb job of explaining the construction and use of the financial statement (as well as other financial tools and statements) via a hypothetical company. Mr. Ittelson takes the reader through many of “any corporation” transactions and weaves the fictional story with real financial statements.

I believe the reader may find the second section the most beneficial part of the book, and may use it not just as a learning tool but also as a reference guide for their own business situation. One caveat to the above statement, a novice financial reader may find this section a bit overwhelming so patience is required.

I am not sure if this book fits to be the first accounting book you should read, but if you are willing to invest the time and energy you will find many insights and nuggets of wisdom in this book.
Profile Image for Mohamed.
36 reviews26 followers
December 11, 2020
I have read this book because I am in a process of educating myself about the current financial system governing this world. The outcome of this education process might directly or indirectly benefit me in my career or in my life decisions.
Life has become very complex. To guarantee a chance of having a decent life in this complexity it has become required to understand the complex tools that is embedded in this complex system. Similarly to modern computers, what we experience in this life is the front end but what governs life is the back end. In my honest opinion, understanding the financial system and how it operates would allow me to understand a portion of life complexity.

I have read two books about accounting and finance, this book has been the best and the most comprehensive so far. It explains the concepts and the elements constituting financial statements and then provides detailed scenarios on how these elements are interrelated. The detailed scenarios of the book comprehensively covers many stages an enterprise would go through from establishment to expansion and going to public, things I have not seen mentioned in the popular accounting and finance books I previously read. The comprehensiveness of the book would make it a very good reference for non-financial and non-accountant, it is a non-one-time-read book. Some of the topics covered in this book includes, but not restricted to:

* Costs vs expenses
* Risk and Uncertainty of Investments (e.g. the risks and uncertainties of expanding the business of a successful applesauce factor.)
* Discounted cash flow analysis and investment rate of return.
* Weighted Average Cost of Capital (aka WACC) and risk premiums.
* Fixed costing and variable costing.
* Standard costs, actual costs, and the costing variances.
* Volume based break-even analysis.
* Profitability and financial ratios.
* Creative accounting.
* Venture capital and leverage.
* Par value, diluted earnings and basic earnings.

The only thing I regret about this book is reading it on Kindle.
I highly recommend the book to non-finance and non-accountants interested to know about accounting and finance, investors, and the individuals interested in understanding the surplus value generated by the capitalist mode of production.
Profile Image for Ramil.
49 reviews6 followers
August 30, 2020
I have had a serious difficulty to understand the way financial statement is constructed and how different elements are connected to one another in it. After reading through this book, now everything is clear to me. Every element in a financial statement is perfectly explained based on the vivid examples by author, which ease the comprehension process of the whole concept into you.
Profile Image for Alaeddin Hallak.
157 reviews22 followers
October 13, 2016
I loved how it ties all basics you need to know about accounting, valuation, and capital budgeting into one concrete case study. I came out with a lot more confidence in understanding company's fundamentals through its financial statements, and this will help immensely in value investing.
Profile Image for Sinh Tài.
2 reviews4 followers
April 12, 2020
Great for non-finance types who want an interesting and applicable approach to financial reporting without going into details as in Accounting 101 classes. You get to understand the concepts of financial reporting, how the 3 statements are connected and most importantly what all the numbers and jargon really mean to a business. All are delivered in simple language with a good sense of humor of the author.

Also great for finance types who want a quick but thorough revision of financial reporting.

"This accounting and financial reporting stuff is not rocket science."
Profile Image for Fengyang Song.
28 reviews2 followers
February 28, 2017
The best book I have read in explaining very clearly what each line item on the financial statements mean. For example, how do they link to one another, and most importantly, how do we interpret these numbers.

Reading this book back to front was a joy, and this speaks volumes on a traditional dry topic for most people.
Profile Image for Từ Đọc Đến Viết.
54 reviews8 followers
May 19, 2020
Một cuốn sách rất hay và dễ hiểu cho những người ngoài ngành, không hiểu về tài chính doanh nghiệp, báo cáo tài chính hay nghiệp vụ kế toán. Cuốn sách được xây dựng từ những định nghĩa căn bản trong việc lập báo cáo doanh nghiệp đến việc lấy ví dụ về một công ty giả định với những giao dịch từ khi thành lập công ty để người đọc dễ hiểu và dễ áp dụng. Điều quan trọng là cuốn sách khiến cho những người không có kiến thức cơ bản về tài chính như mình cảm thấy hứng thú và đọc hết cuốn sách mà không cảm thấy nhàm chán.
49 reviews6 followers
November 12, 2017
Finance, Biology and neuro sciences are the very definition of the dry subjects in my opinion. One cannot read a line or two on these subjects without stumbling upon some obscure jargon, making them quite inaccessible for the layman.
So when I picked up this book I was first dismayed by its volume as I thought that it was going to be those books which I pick but never finish.
But I was amazed, as the author took us on the journey to prepare all the three statements of a company from scratch. Pages are built up on the previous pages and suddenly you start to see the light. So moving to the good and the bad parts:
Pros:
1. The chapters progress in a story book style, making the material interesting as well as accessible to the general public.
2. The financial statements are build up in a step by step manner as the title suggest. So you understanding picks up one step at a time, giving you the real understanding of the numbers.
3. The financial statements are clearly marked on each page under "Previous value" , "Transaction" & " New Value". This helps in keeping track of the changes. Personally I worked on Microsoft excel while going thru the transactions, which helped me in algebraic functions quickly.
4. The author moves straight to the point, cutting any unnecessary jargon and clutter.
5. The three major financial statements balance sheet, Income or profit and loss statement & cash flow statement are taken simultaneously. This helps the reader to observe where the affect of any particular activity is reflected on all the statements at a single place.
6. The problems are presented as statements basis which an explanations and financial statement updates are provided.

Cons:
1. Its not really a con but the style of the book is not good for just picking up and opening at a random page. This book needs to be finished from first page to the last. So if you are not a financial expert and you just want to know inventory calculation, your jumping in that section will not help much if you never read the previous pages.

2. The author should encourage the reader to write on notebook or work on an excel sheet along with him so that every thing gets imprinted in a reader's mind.

3. The style of book is awkward. The financial statements are presented first and then question and explanations are provided. The reverse format would have been better.
Profile Image for Adrian.
142 reviews21 followers
June 2, 2020
A total must read for anyone that wants to :
- start a business
- get some accounting basics
- invest in the stock market (my case)

I knew there is alot more to company valuation then reading bloomberg news , checking the P/E ratio , ROI and Growth.

This book provides you with the building blocks of starting a business and of course by learning how to build , one learns to evaluate one business worth.

Impressive diagrams , schematics and comments. This book brings you in ~300 pages from zero to hero in thr field of finance , accounting , management and investing.

The author treats the financial statements in depth , taking all items one by one and discussing , explaining the intricate relationships betweeen them.


It is a shame books of financial tycoons such as Buffett/Lynch and all those "startup gurus" get all the media while this hidden gem is barely noticeable.

Masterpiece !
Profile Image for Manoj.
9 reviews6 followers
July 12, 2020
For those with a non-finance background yet needing to understand the the financial statements line by line, I recommenced this book before anything else. Simple to read and well written.
Profile Image for Hoon Wee.
20 reviews1 follower
September 5, 2023
Ever since I studied quant investment, I knew that someday I should do studies how to read and analyze financial statements.

And a few days ago, I picked up this book - not because of the investment purpose, but because I am currently planning my own business and was curious how to use financial statements.

The book has five chapters (at least for the 3rd edition, not sure for previous editions), but at the higher level it can be divided into *three parts*. **The first part** introduces basic terms and knowledge that readers should know before proceeding to the following chapters. **The second part** shows how a company's financial statement is being changed over trade by trade. **The last part** shows how we should use it to establish the decisions with the quantitative analysis. The last part includes some mathematical formulas, but it won't hurt your brain so much (if you're interested in investments, you should be a good friend of math anyway).

The book does a fantastic job explaining all these contents. Also, I like that it touches on a good level of detail about the subject - not too deep to get overwhelmed, nor too shallow for feeling it was a waste of money to buy this book. No wonder it became a bestseller in the financial category on Amazon.

I highly recommend this book, especially if you're a finance newbie who just started to feed your money-brain.
Profile Image for Kulwinder Rajpal.
1 review2 followers
January 26, 2018
This is one of the best books out there to explain financial accounting in a simple manner. It covers all the basic concepts related to financial statements via a detailed introduction to the various terms and types of financial statements. Then it explains them with an example of a start up and a series of transactions that show how accounting changes with the changes in business. It also shows you how a financial statement could look like and what parameters are to be looked at while evaluating a business. At the end it also shares some light on concepts on NPV and IRR linking the concepts to throw some light on good business decisions. It may not cover everything that you would find in a modern financial report of an institution because that’s entirely a matter of perception but it’s certainly a good book to start learning basic accounting.
156 reviews13 followers
April 10, 2019
3 stars because its such a boring topic and it could have definitely been done better. However, this book is helpful in a few ways. I now have a clear understanding of..

1. The three financial statements. I understand what they say, how to read them, and the vocabulary that accompanies them.

Income Statement = profitability
Balance sheet = assets, liabilities, and equity
Cash flow statement = cash movements

2. Ratio Analysis

3. The major equations/mechanisms of modeling of finance, including NPV, IRR, ROI. I wish more had been said about Monte Carlo Analysis and Real Option Analysis.

Overall good book to read in an evening to passively learn about financial statements. Probably not good if you want to make ledgers and translate them into balance sheets, income statements, and cash flow statements.
Profile Image for 202 unknown.
477 reviews25 followers
December 14, 2022
Tựa Việt: Báo cáo Tài chính - Hướng dẫn từng bước hiểu và lập báo cáo tài chính.

Mình k thấy cái hay của sách với tư cách cựu sv kế toán. Các thuật ngữ được dịch k thống nhất với các thuật ngữ được dùng hiện tại ở VN gây khó khăn. Chuẩn mực kế toán Mỹ có những điểm khác VN. Người dịch mình e là k có hiểu biết về luật pháp và chính trị Mỹ bên cạnh kế toán, nên khúc cuối dịch vài sự kiện liên quan đọc hơi chán, dù chỉ là điểm trừ nhỏ so với tổng thể.

Nên có một ai đó người Việt viết về kế toán VN bán cho độc giả Việt sẽ tốt hơn.
Profile Image for Patrick.
7 reviews
February 5, 2017
This is a really good book for review. I am going back into a business degree and Its been several years since I have had accounting. This book acted as a great refresher and it is laid out in a very logical manner. I would say that you might wanted to consider the printed version vs the kindle version. Because of the layout of the book and the type of subject matter, it does not lend itself to be easy to read on the kindle.
6 reviews
December 27, 2020
A great book on understanding financial statements and key financial terms for investment. Definitely a good start for people who have zero knowledge or forgot about finances of an enterprise. Also a good primer for beginner value investors. I will read it again, to review the main messages of the book. This should present a knowledge primer allowing me to move to more challenging books suck as The Intelligent Investor.
Profile Image for Ben Donahower.
87 reviews
May 1, 2019
Useful book, limited examples

This was a useful book in understanding several forms and accounting. if I had a challenge it was that it followed a manufacturer, Appleseed partners, so the examples were all related to this business. For continuity sake that was great but it also left me wondering if there were examples in a service business would have been more relevant to me.
July 10, 2023
It's a highly useful book that benefits both beginners and professionals. For beginners, it presents the basics in an understandable and readable manner. Professionals can also find it helpful as a recap. If I had access to such textbooks during my student years, my grades would have improved significantly. Therefore, I recommend this book to anyone interested in accounting.
76 reviews1,657 followers
May 11, 2018
Fine book. Comprehensive and for beginners. What makes this book special is the author walks you through a few years operation of a business, and shows the statements along the way. Not a page turner... but useful. And a real good summary of broader business topics at the end.

I recommend it.
Profile Image for Rob Weir.
Author 3 books11 followers
July 10, 2018
If you find yourself needing to have a conceptual understand of financial statements, what they tell, how they are put together, and how they can be interpreted, it is hard to go wrong with this engaging, approachable book.
14 reviews
June 3, 2019
This book will bring clearity about how the 3 financial statements are linked to each other. Use of easy language and example of a newly established company makes this an interesting read for non-accounting personnel..!!!
1 review1 follower
March 30, 2020
The best book that explains the way to develop accounting entries to set up an initial set of financial statements. Clearly based on current accounting definitions and commonly held accounting conventions. Written to pull a reluctant reader along.
Profile Image for Shifu Fong.
1 review
January 15, 2022
best financial statements book i have ever read

It is so easy to understand
This book is good enough for some one like who just to know more about the financial statement analysis to invest in the stock market
Profile Image for Andrei Savu.
52 reviews54 followers
November 13, 2018
Good book to have around. Very helpful to understand how financial statements change in response to changes in the business.
Profile Image for Anmol Jindal.
5 reviews4 followers
November 14, 2018
A must read for anyone starting his own business and anyone even remotely interested in finance.
Displaying 1 - 30 of 81 reviews

Can't find what you're looking for?

Get help and learn more about the design.